Hydropower Sustainability Environmental, Social and Governance Gap Analysis Tool Operation Stage Assessment: Stortemelk Hydro, South Africa December 2020 Published by: International Hydropower Association Ltd Chancery House, St Nicholas Way Sutton, London SM1 1JB, United Kingdom Email: [email protected] First published July 2018. This edition published May 2020. Copyright © 2018 International Hydropower Association Limited. The “International Hydropower Association” name and logo are the property of International Hydropower Association Limited, a not-for-profit company limited by guarantee, incorporated in England (No. 08656160), the operator of the International Hydropower Association. All rights reserved. No part of this publication may be reproduced, stored or transmitted without the prior permission of the publisher. Hydropower Sustainability Environmental, Social and Governance Gap Analysis Tool About the HESG The Hydropower Sustainability Environmental, Social and Governance Gap Analysis Tool (HESG) enables hydropower project proponents and investors to identify and address gaps against good international industry practice. The HESG is based on the assessment framework of the Hydropower Sustainability Assessment Protocol (HSAP) and draws from the definitions of good international industry practice of the Hydropower Sustainability Guidelines on Good International Industry Practice (HGIIP). Intended users and uses The HESG includes three separate stage tools: Preparation, Implementation and Operation. These reflect the different stages of hydropower development and have been designed to be used as standalone documents. Each tool provides an action plan to help project teams address any gaps against good practice. Official HESG assessments are carried out by accredited assessors, who take an evidence-based approach. All findings are supported by objective evidence, which is factual, reproducible, objective and verifiable. The HESG is most effective when operators and developers commit to implement the recommendations provided and resolve identified significant gaps. In addition, the tool is aligned with the safeguards and standards of international financial institutions and can be used to attract climate-aligned investment. Hydropower development and operation may involve public entities, private companies or combined partnerships, and responsibilities Operation may change as the project progresses through its life cycle. It is intended that the organisation with the primary responsibility for a project at its particular life-cycle stage will have a central role in any HESG assessment. Structure of the tool The HESG comprises 12 sections that cover the environmental, social, governance and climate change topics of the HSAP and HGIIP. A summary at the beginning of the report presents any significant gaps against basic good practice and outlines an action plan for improved performance. Within each section, requirements for good international industry practice are presented and project findings are provided. For each finding, a key indicates whether the requirement is met. A summary section analyses significant gaps and identifies each one with the symbol ●. Supporting resources Additional guidance on the structure, content and history of the HESG can be found online at: www.hydrosustainability.org Version date May 2020 HESG |3 Stortemelk Hydro Project Executive Summary Overview of Project The 4.3 MW Stortemelk run-of-river hydropower plant was commissioned in 2016. It was added to an existing dam commissioned in 2001, which is owned by the South African government Department of Water and Sanitation (DWS) and receives water transferred from the Lesotho Highlands Water Project (LHWP). The dam is located on a small, previously intermittent tributary of the Ash River in the Free State province. Stortemelk Hydro is majority owned by REH Group. Assessment Results Site selection and design of the Stortemelk project have resulted in an exceptionally small environmental and social footprint. The project uses an existing dam, reservoir and access road. It was constructed on a small parcel of previously disturbed land and operates on a river previously transformed by the LHWP. It is well integrated within a private nature reserve and has won an architectural award. There are no significant social impacts, but substantial benefits for the local community. The project is also very efficient, has a high load factor and contributes to South Africa’s transition to a low-carbon economy. Two significant gaps were identified and corrective actions agreed. The developer will improve public access to project information, and will work with the dam owner DWS to clarify responsibilities for maintenance and emergency preparedness. The assessment contributes to REH’s continuous improvement of its project portfolio across southern Africa. The Stortemelk project can serve as a model for sustainable development of small hydropower, based on avoiding impacts and reducing costs through good site selection, systematic management of any remaining impacts, and enhancement of positive impacts. Contents Operation A. Assessment Details 5 B. Project Details 6 C. HESG Gap Analysis Diagram 10 D. Significant Gaps 11 E. Observations 11 F. Environmental anD Social Action Plan (ESAP) 12 DetaileD Assessment (12 Sections) 13 AppenDices 1-3 58 Stortemelk Hydro Project A. Assessment Details Project sponsor Stortemelk Hydro (RF) Proprietary Limited Assessor(s) Joerg Hartmann PhD, Sustainable Water & Energy LLC Assessment objectives • Improved communications, transparency and stakeholder relations • Internal skills development • Qualification for possible green/climate bond financing Assessment dates November 9 – 20, 2020 Assessment report date December 8, 2020 Prepared for Anton-Louis Olivier and Jan-Louis Janse van Vuuren (REH) Nyundo Armitage from Armitage Consulting in Zambia, who recently participated in IHA’s Certified User Training and works with REH in Zambia, also reviewed this Assessment Report to become more familiar with the Hydropower Sustainability Tools. Limitations of the This assessment was conducted remotely from the assessor’s home office in Colorado, US. It followed the guidance in the IHAS’ assessment White Paper on Remote HSAP and HESG Assessments, approved by the Hydropower Sustainability Governance Committee in October 2020. A remote assessment was possible in this case because Stortemelk is a small, recently commissioned, well documented and low-impact project. It does not have permanent staff on site and can be partially controlled and operated remotely, so that some facilities for a remote assessment are already available (such as surveillance cameras). The client’s project manager travelled to the site to enable the assessor to visit the plant on a live video link, to provide up-to-date photos and video/drone Operation footage, and to set up and participate in several video calls with local stakeholders. All the assessor’s requests for access to different project components, documents, staff and stakeholders were met. Some stakeholders did not respond to repeated invitations to comment, which is interpreted as a lack of concern over, or interest in the project. The remote assessment presented a small number of logistical difficulties, such as internet bandwidth on some occasions as well as the difference in time zones, but the depth and breadth of information available to the assessor left nothing to be desired. The assessor and client agree that the remote assessment approach can work well under conditions similar to this assessment, as well as reducing the medical risks, environmental footprint and costs of an assessment. The 22kV transmission line, which was built and is operated by the offtaker Eskom under a different set of permits and servitude arrangements with private landowners, was only partially reviewed under this assessment, but there are no indications that is has caused significant impacts. A. Assessment Details HESG |5 Stortemelk Hydro Project Operation B. Project Details HESG |6 Stortemelk Hydro Project B. Project Details Project name Stortemelk Hydro Country South Africa Location Free State province, Dihlabeng municipality, on the Ash River Purpose Hydropower plant retrofitted on an existing energy dissipation/erosion control dam Developer / Owner Renewable Energy Holdings (REH) Mertech/Mergon Group, H1 Capital, CCIA (equity contributions), Rand Merchant Bank (15- Financer(s) year project finance loan) Installed capacity (MW) 4.3 MW Construction start date (planned or actual) 2014 Commercial Operations Date (planned or actual) 2016 Annual average generation (GWh / year) 27.5 GWh/year Associated infrastructure: road(s) (length) No new roads, some improvements to short access road Transmission lines and sub-stations (names, lengths and capacities) 9 km 22 kV transmission line to ESKOM Node substation, south-east of Stortemelk Total cost (USD m) USD 18 million Annual operating costs (USD m) USD 240,000 (2018-2019) Transmission costs for project development (USD m) USD 400,000 at the mid-2016 exchange rate, reimbursed to ESKOM Specific investment cost (USD m / MW) USD 4.2 million / MW Levelized cost of energy (USD / kWh) Not calculated in project documentation, but project selected through competitive bidding Dam type Pre-existing RCC dam and spillway, with earth embankment dam flanks on left and right bank Operation Dam height (m) 16 m Dam length at crest (m) 50 m left earth embankment, 30 m concrete spillway,